Investors are starting to lose some of their faith in this market cycle.
For the second straight month, Bank of America Merrill Lynch’s global fund manager survey indicates that investors are as bearish as they’ve been on the global economy since 2008.
In November, 44% of fund managers said they think global economic growth will decelerate in the next 12 months; last month, 38% of fund managers thought the same. These are both the highest readings since November 2008.
But in Tuesday’s latest survey, a slight increase in the number of investors looking for a deceleration in the world economy was overshadowed by a clear step-up in bearish views on the world’s most important risk market — the S&P 500.
In November, 30% of investors said they thought that U.S. stocks have already peaked, roughly double the 16% of investors who thought stocks had peaked last month. (Emphasis ours.)
A third of investors polled by Bank of America throwing in the towel on higher stock prices this cycle doesn’t show outright capitulation, but the continued choppiness for the market after a brutal October has clearly increased concerns that the market’s best days are behind investors. And this data indicates a creeping anxiety among investors about the overall direction of the market, which for the last few years has been clearly up and to the right.
Stronger global and U.S. economic growth and stellar corporate earnings had been more than enough to keep bulls resolute about the market’s general trend over the last two years. Fears over rising interest rates, slowing global economic growth, slowing earnings growth, and rising interest rates have cast that market view into doubt over the last few months.
Overall, fund managers surveyed by BAML still see the market rising before the end of this cycle — BAML’s survey shows investors think the S&P’s eventual peak this cycle will be 3,056, a roughly 12% advance from current levels. “We remain bearish, as investor positioning does not yet signal ‘The Big Low’ in asset markets,” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch.
Again, a gloomier view on the global economy does not indicate an outright rolling over of investor sentiment. But continued tepid optimism for a modest rise in stock prices amid a doubling in the number of market participants that think we’re not going anywhere but down makes clear that investor confidence continues to bleed out of the market.
And indicates there is still plenty of room for the situation in financial markets to get much worse.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland